The Ultimate Guide to GST on Export of Services from India
Learn the tax positions, zero-rated supply rules, LUT (Letter of Undertaking) requirements, and key compliance checks for exporting services from India.
Understanding GST on Export of Services
Export of services from India is treated as an "inter-state supply" under the Integrated Goods and Services Tax (IGST) Act. However, to encourage foreign exchange inflows, the government classifies exports as a Zero-Rated Supply.
This means you do not have to pay GST on exports if you satisfy the conditions, and you are eligible to claim refunds for the input tax credits (ITC) accumulated on your business purchases.
Key Conditions for a Service to Count as Export
According to Section 2(6) of the IGST Act, five conditions must be met simultaneously for a transaction to qualify as an export of service:
- The supplier of service: Must be located in India.
- The recipient of service: Must be located outside India.
- The place of supply: Must be outside India (determined by the Place of Supply rules).
- Receipt of payment: Must be in convertible foreign exchange (or Indian Rupees where permitted by FEMA/RBI).
- Not merely establishments: The supplier and recipient must not be merely establishments of a distinct person.
The Role of LUT (Letter of Undertaking)
To export services without paying 18% IGST upfront, exporters must file an LUT (Form GST RFD-11) at the beginning of each financial year. If you fail to file the LUT, you must pay the IGST on the export and then apply for a tax refund from the department.